Guide
Health Spending Account in Canada
A compliant way for incorporated Canadian businesses to reimburse medical expenses tax-free.
What is a Health Spending Account
A Health Spending Account (HSA) is a tax-free benefit your corporation sets up and offers you as part of your employment contract, to cover personal medical expenses.
When structured properly, it qualifies as a Private Health Services Plan (PHSP) under CRA rules. That means every approved reimbursement is tax-free to employees and fully deductible to the business.
This is a self-insured plan. Your business acts as the plan sponsor, and participants (you and your employees) are the plan members.
You choose an annual limit, up to $15,000, and the full amount is available across all eligible health and dental categories.
There are no sub-limits for things like dental, massage, or vision. If a claim meets CRA eligibility rules, it’s covered.
There are no monthly premiums and no locked-in funds. You only send us money when a claim is approved, aside from the flat annual platform fee.
Hiveworks handles all aspects of your plan administration.
See details on Health Spending Accounts.
The Efficient Way to Pay for Healthcare
Why pay premiums for coverage you don't use?
Tax-Free Reimbursements
Eligible reimbursements are tax-free to employees when the plan qualifies as a PHSP under CRA rules.
No Monthly Premiums
You don’t pay insurance premiums. You fund approved claims as they happen, based on the limit you set.
Covers Your Family
Coverage can extend to your spouse and eligible depedants within the same annual fee and annual spending limit.
No Category Caps
There are no built-in sub-limits for dental or vision. If the expense is CRA-eligible and within the plan limit, it can be reimbursed.
From Receipt to Reimbursement
A fully digital process built for Canadian businesses.
1. Pay for Health Expenses
Employees pay out of pocket for eligible health or dental expenses, just like they normally would.
2. Submit a
Claim
Upload the receipt and submit the claim in about 60 seconds.
3. Business Funds
the Claim
Once approved, Hiveworks invoices the business for the claim amount, plus any required taxes. No pre-funding required.
4. Reimbursement Issued
After payment clears, reimbursement is issued by direct deposit, with records stored digitally.
Eligibility
To open a Hiveworks Health Spending Account you must meet this criteria.
Incorporated in Canada
The plan must be sponsored by a legal Canadian corporation.
Pays T4 income to one or more arm’s-length employees
Employees must receive T4 income to establish a valid employer-employee relationship for CRA purposes.
The HSA is structured as a formal employment benefit
The plan must be offered as part of the employee’s compensation package and apply uniformly within each employee class.
Sets and maintains reasonable annual limits by class
Annual reimbursement limits must be defined by employee class (for example, Owners, Managers, Associates) and remain consistent for all employees within that class. Limits should align with compensation levels and job roles, typically within 10 - 15% of salary, to ensure the benefit is fair and compliant.
Optional: Spouse and Dependants Eligibility
Your spouse or common-law partner can also be covered under your HSA, along with children under 21, children under 25 who are enrolled in full-time post-secondary education, and children of any age who are physically or mentally dependent. All must live in the same household as you.
Incorporated in Canada
The plan must be sponsored by a legal Canadian corporation, excluding QC.
Pays a T4 salary from the business
T4 income clearly shows that you're an employee of your corporation. This helps establish the employer-employee relationship that is expected.
The HSA is part of your employee compensation
It must be set up as a formal employment benefit, not a shareholder perk.
No arm’s-length employees
Only your spouse or dependants may be employed in the business.
You set a reasonable annual limit
The amount must reflect your compensation and job role, to a maximum of $15,000. Industry guidance suggests the benefit should fall within 10 - 15% of your salary and be consistent with what a comparably paid employee in another corporation might receive.
Optional: Spouse and Dependants Eligibility
Your spouse or common-law partner can also be covered under your HSA, along with children under 21, children under 25 who are enrolled in full-time post-secondary education, and children of any age who are physically or mentally dependent. All must live in the same household as you.
Eligible HSA Expenses
A Health Spending Account covers 50+ practitioner types and 100+ expense types with no pre-set category limits.
Health Practitioners
You can claim medical visits to a wide range of licensed health and dental professionals. It's important to note that even though the practitioner appears on the eligible list, not all services and products are eligible. Some of the most common practitoners:
Dentist / Orthodontist
Registered Massage Therapist
Chiropractor
Optometrist
Physiotherapist
Psychologist / Psychotherapist
Over 50 practitioner types are covered and eligibility varies by province
Medical Expenses
Beyond health services, your HSA also covers a wide range of eligible products, procedures, and medical equipment. Some of the most common being:
Prescription Drugs and Medications
Orthodontic Work / Braces
Vision (prescription eyeglasses, contact lenses)
Orthopaedic Shoes and Inserts
CPAP Machines and Breathing Devices
Hearing Aids and Assistive Listening Devices
Mobility Aids
Laser Eye Surgery
Premiums Paid to Group Health or Dental Plans
If you or your spouse have existing health and dental coverage, the premiums you are paying for those plans may be eligible expenses under your HSA
Over 100 medical expenses are eligible under CRA rules
Here's Your Savings
See how much you can save with a Health Spending Account.
Save $$$ with a Hiveworks HSA
$1,838 goes to taxes due to a 31.48% marginal tax rate before you even pay for your health care.
Your company pays $4,659 as a business expense, reducing taxable income.
This includes your $4,000 in health spending, the HSA fee, and required taxes.
You save $1,179 by eliminating the need to withdraw taxable salary for medical costs.
Step 1: Calculate pre-tax salary needed: $5,838 = $4,000 ÷ (1 - 31.48%)
Step 2: Determine tax amount: $1,838 = $5,838 - $4,000
Step 4: Your savings: $1,179 = $5,838 - $4,659
For accurate tax information, please consult with a qualified tax professional.
How HSAs Vary by Province
Hiveworks supports incorporated business owners across Canada.
If you want to see how an HSA works in your province, choose one of the guides below.
Each guide covers provincial rules, health costs, and examples tailored to local business owners.
Ontario Health Spending Account
How HSAs work in Ontario, including RST and Insurance Premium Tax rules.
Alberta Health Spending Account
A simple overview for Alberta business owners.
BC Health Spending Account
BC specific examples, eligible expenses, and how HSAs pair with local health costs.
Manitoba Health Spending Account
Details for Manitoba owners, including examples for rural and Northern travel needs.
Saskatchewan Health Spending Account
What Saskatchewan incorporated owners can claim and how to maximize savings.
Frequently Asked Questions
Is a Health Spending Account CRA compliant?
Yes, when structured as a PHSP and administered properly. Hiveworks reviews claims against CRA eligibility rules and supports a compliant plan structure.
Can I replace my existing group insurance with this?
Some businesses replace group benefits, others use an HSA to top up gaps like dental, vision, and therapy. It depends on your team size, budget, and whether you need catastrophic coverage.
Is the HSA benefit taxable for my employees?
When the plan qualifies as a PHSP and reimbursements are for eligible medical expenses, reimbursements are generally tax-free to employees.
How do I control costs if there are “No Category Limits”?
Yes, orthodontic work like braces are eligible as long aYou control costs by setting annual limits and employee classes. The plan can’t pay more than the limit you set.s it’s for medical reasons and performed by a licensed dental practitioner.
Are big-ticket items like braces or laser eye surgery covered?
If the expense is eligible under the Medical Expensew Tax Credit criteria and within the employee’s remaining limit, it can be reimbursed. Eligibility can depend on documentation and not all services and product from an approved practitioner are eligible.
How much time does this take to manage?
Most businesses spend very little time on it. Setup is digital, employees submit claims directly, and records are available for reporting and accounting exports. There is nothing really required from you as the owner once you have set it up.
.svg){kind=small}